BW Enterprises Ltd: Board Advice on Company and Finance Law

This case study provides legal advice to the Board of Directors of BW Enterprises Ltd, identifying legal issues with relevant case laws and provisions under the Corporation Act and ASIC Act. It addresses circumstances attaining majority shares, information sharing to outsiders, removal of non-executive directors, board meetings, and attracting investors. The analysis covers equity and debt financing, dividend distribution, director responsibilities, and potential removal grounds. It also discusses methods for companies to acquire funding, including retained earnings, debt capital, and equity capital, evaluating their suitability for BW Enterprises Ltd's situation, which has faced continuous losses in the last two years. The document concludes by summarizing the importance of company and finance laws in regulating business conduct and operations.

COMPANY AND
FINANCE LAW Case
Study Assessment

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
From the information above you are required to provide advice to the Board of directors of
BW Enterprises Ltd:....................................................................................................................3
identify the legal issues with relevant case laws and relevant provisions..................................3
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
The Company law is the backbone of all types of industrial revolution that take place during
the era of 1900. The UK has enacted the corporation law to ensure legal protection to the
incorporation of the company. The company has unique features which includes separate legal
entity, perpetual succession, limited liability , transferability of shares and many more. The
Company law has enabled the company to enter into contracts more efficiently to ensure
transparency in the working system within the organisation. The shareholders are the owners
who engaged in decision making process for the company. The iedea to make company as an
artificial person and separate legal entity evolved from the common law of the UK. The
Company Act , 2006 provides rights and liabilities of the members of the company. It defines
special provision for appointment of directors, managers and employees for smooth running of
an organisation. The Company is derived from the word 'corporation' means an association of
persons who comes together to achieve common goal.
TASK 1
From the information above you are required to provide advice to the Board of directors of BW
Enterprises Ltd:
identify the legal issues with relevant case laws and relevant provisions.
1. What are the circumstances that attains majority of shares of the Company
2. What are the causes for sharing information to the outsiders.
3. What are the procedure for removal of the non executive director.
4. What are the conducting meeting of the board of directors.
5. What are the procedure to attract investors for the company.
Provisions under Corporation Act and ASIC Act
Company is required funds and financial sources to expand their business. So, in order to
diversify the business, company need option to take credit from the debenture holders and
investment from the shareholders
(Bajra and Čadež, 2018). This is the mechanism through which company manages difficult time
management for ensuring sufficient availability of funds whenever it is needed. There are many
financial institution that provides funds to the company and gives them appropriate rate of return
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to encourage better flow of investment in the company. There are two essential of promoting
financial soundness of the management are:
 Equity: In order to raise funds, companies usually prefer an option between equity and
debt. Equity can be raised from the shareholders and ensure good return on such
investment. The interest payment is received by the shareholder in the form of dividends.
The definition of shares in provided under section 1070 A of Corporation Act(Smith,
2018).
 Debt: Another mode of raising funds is borrowing from the financial institution in the
form of loan. As per section 9 of the corporation Act, allows company to lend money as
a security to meet the requirements of fund(Balp, 2019).
Under section 124 of the Corporation Act, a company has a right to issue share , debentures
over the asset of the company. Company under the legal capacity are entitled to grant, distribute,
circulate any security interest over the company's property. It is very necessary to provide
dividend to the shareholder to protect their rights in the company. Dividends is given in the form
of asset to the shareholders. It is the general rule that company must pay dividend out of its
accumulated profits and realised profits then distribution is made for dividends.
It is necessary for the company's director and mangers to keep maintain public details
records. Corporation Act, 2006 ensures transparency in appointment of directors for smooth
functioning of the company. According to section 158 of the Corporation Act, 2006, Directors
are entitled to file service to address the matter related to public records. They can address only
such public records that are required by enforcement and regulatory bodies. Such information are
to be protected under section 241 and 242 of this Act. It cannot be disclosed to the third parties
otherwise, an action can be taken against the disclosure of such information(Campbell,2018).
The United Kingdom corporate law allows its directors to shared information only in good faith
along with due diligence to avoid information related to personal interest. In the case of Daniels
v Anderson (1995) 13 ACLC 614, common law has established minimum standards for the
members of the company includes familiarise with the financial position of the company and
monitor management, conduct meetings and avoid misconduct among members. A director is not
allowed to benefit personally by using the position of the authority. It is compulsory obligation
on the director to taken consent of the company to avoid breach of conflicting of interest. In the
case of Cook v Deeks [1916] 1 AC 554, the Court held that breach of duty by three directors are
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using it for personal interest , exceeding their duty to breach the term and condition of the
contract. In the case of In the case of Boston Deep Sea Fishing & Ice Co v Ansell (1888) L.R.
39 Ch. D. 339, the court made significant judgement and observed that it is the duty of directors
to take care due diligence in sharing any information . It is the objective of common law to take
reasonable care and skill to maintain the interest of the company(Davies, 2020).
The director can be removed for under performing or excessive use of his power make him
liable from removal from their position. The companies Act, 2006 provides statutory provision
for removal of director by ordinary resolution (50%) majority in general meeting of the
company. Section 168 and 169 specifically deals with the removal of director take place not
exceeding 28 days from the date company accept the special notice. The unfair prejudice claim
can be a ground for the removal of director when any part of shareholders are treated unfair .
The Board of directors are the highest authority in the company who performed core function
of the company. Section 303 of the Companies Act, 2006 talks about the power of the directors
to call meeting , it can be call any time, of the company find it as reasonable to conduct the
meeting . The Companies Act does not define minimum notice period to call for meeting.
According to section 309(1) of the companies Act, 2006 , it provides fair treatment of
shareholder for the efficient functioning of the business. It ensures easy flow of finance required
to run the business. It needs to foster the company's assets and attracts large number of customers
to create brand value.
It is very often required on the part of companies, for the purpose of expanding the ambit
of their business in the market. Generally this is accomplished by the way of attaining the funds
via external as well as internal sources. Moreover, by the ways of appropriate findings the
companies can have the adequate ascertaining of the prevailing competition in the market by the
way of investing in the department of research and development of the company. The business
often seeks to have the more favourable options for the purpose of acquisition of the funds
through external lenders as well as investors(Dignam, 2020) . Furthermore, there lies the various
way in which the businesses can be funded where some major out of them are the options of
retained earnings, equity capital, debt capital, etc.
The very first being the retained earnings, are considered as one of the most primary
source in which the companies can be funded. By the way of this the institutions usually gain
revenues by the way of selling their goods and services in the required markets for the purpose of
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earning profits out of it(Roach, 2022). Here the goods are sold by the company in more prices
than it is in actual sense is required to produce. Moreover, as this is the primary source which
helps in bringing the money to the firm, is also addressed by net income of the company which is
leftover after the deduction of the total expenses and obligations. Moreover the said form of
funds are the ones which are solely kept by the company rather then paying it to the shareholders
in the form of dividends. Retained earning are said to be increased with the increased earnings of
the company and thus it results in creating a higher pool of capital for further investments. But
there also lies various drawbacks of the stated option as the use of this option for funding may
result in loosing the value of the shareholders which further can be reinvested into the company
reason being there lies the possibilities that they wont result in higher profits. Other than this it is
also contended that the use of retained earnings by the company is does not stand effective in
terms of cost reason being in actual sense they does not belong to the company company rather
they belongs to the concerned shareholders of the company. But in the given case the company
can not use the method of retained earnings for the purpose of further funding as they are facing
the continuous losses in last two years(Gerner-Beuerle and Schillig, 2019).
The other option of capital funding is the debt capital. By the way of this option the
companies can explore the capital in manner similar as that of the borrowing money from the
individuals. The use of this way is very common in the country on the part of companies for the
purpose of fuelling the business by adding new funds. Moreover, during the working of company
there arises various instances when the debt capital comes in handy for the purpose of short term
needs. Also many a times it is required on the part of business to have the capital on the short
notice and that too in the large amount. In this the capital can also be acquired by the way of
borrowing money form the private and traditional means such as by the way of personal loans
from banks as well as other lenders in the market or by the way of publicly through a debt issue.
The measure of debt capital comes in the form of debt issues and the traditional loans. The term
debt issues are also addressed by the name of corporate bonds(Grier, 2020). Other than this the
companies just lies the other individuals who are in the need of capital can approach the banks,
other lenders and financial institutions for the purpose of the having the capital they need in the
form of loans and other interest borrowings. But the said manner of funding can bring negative
hope for the companies, specifically the small ones who are facing the era of slowdown.
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The other way of funding is the acquisition of capital by the way of equity capital.
According to the said option the company raises the required capital by the way of selling the
ownership stakes in the form of shares to the interested investors who later tends to become the
stockholders of the company. The said measure is also addressed by the name of equity funding.
Moreover, the corporations mainly the private ones can raise the capital by the way of proposing
the equity stakes of the company to the their relatives such as the friends and family by the way
of declaring the initial public offering. Similarly for the given company, it can adopt the option
of equity funding or the option of personal; borrowings from the small lenders or relatives for the
purpose of acquiring the further capital for the business(Hannigan, 2018).
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CONCLUSION
From the following report it can be very well summarised that the company and finance laws of
the country are the major legislations which takes care as well as regulates both the conduct and
working of the company. The said laws also entails the duties as well as the legal obligations
which lies on the part of company, its directors and the other concerned individuals. The report
also elaborates the various way in which the companies can be funded and the acquisition of the
capital can be done along with the ascertainment of the best suited option related to funding for
the given case scenario.
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REFERENCES
Books and Journals
Bajra, U. and Čadež, S., 2018. Audit committees and financial reporting quality: The 8th EU
Company Law Directive perspective. Economic Systems, 42(1), pp.151-163.
Balp, G., 2019. Early warning tools at the crossroads of insolvency law and company
law. Global Jurist, 19(2).
Campbell, D., 2018. What is Meant by ‘the Rule of Law’in Asian Company Law Reform?.
In Company Law in East Asia (pp. 11-38). Routledge.
Davies, P., 2020. Introduction to company law. Oxford University Press.
Dignam, A., 2020. Company law. Core Texts Series.
Gerner-Beuerle, C. and Schillig, M.A., 2019. Comparative company law. Oxford University
Press.
Grier, N., 2020. Company law. W. Green.
Hannigan, B., 2018. Company law. Oxford University Press, USA.
Roach, L., 2022. Company Law. Oxford University Press.
Smith, D., 2018. Company law. Routledge.
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